DAX 40 and EURO STOXX 50 continue their rise to new highs
European stocks remain strong with the DAX 40 pushing daily to new all-time highs followed closely by the EURO STOXX 50. Weak retail sales data in Germany has slashed expectations that consumer-driven demand could push the ECB to keep rates higher for longer, giving equities some renewed strength. Current pricing shows there are 23 bps of easing priced in for the June 6th meeting, a 67% chance of a 25bps cut plus a 13% chance of a 50bps cut.
ECB probability distribution
Source: refinitiv
The DAX 40 is up 11% in the past three months, looking to close out the month of March with a second quarter of gains. This would be the fourth positive quarter out of the last five for the German index. The gains have been remarkably strong since November but since the start of 2024, the bullish momentum has been intact despite the overextended RSI. The pullbacks have been marginal, allowing only enough space to reset the overbought conditions before pushing higher again, suggesting strength in the rally. The RSI is back firmly above the 70 mark after a small dip a few weeks ago suggesting the pullback on Thursday could spill over into the first week of April, allowing for the RSI to rebalance again. That said, the path of least resistance remains firmly on the upside.
DAX 40 daily chart
Past performance is not a reliable indicator of future results.
Similarly, the daily EURO STOXX 50 chart is also suggesting further bullish momentum. The simple moving averages are stacked in ascending order with a comfortable distance and the daily candlesticks are displaying higher highs and lows. The RSI has started to break the 70 line which in the past has meant that, whilst the bias remains upward, the daily gains become more laboured and are interlaced with minor pullbacks.
EURO STOXX 50 daily chart
Past performance is not a reliable indicator of future results.